A Scandinavian Scandal: Another Nordic banking boss goes out the window

July 10, 2019

2 min read

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What's going on here?

Swedbank has become the second Scandinavian bank to oust its CEO over an ongoing money laundering scandal.

What does this mean?

Birgitte Bonneson, the (CEO of Swedbank), has been fired by the Scandinavian bank over major money laundering allegations that has engulfed both Swedbank and Danske Bank. Lars Idermark, (Swedbank’s chairman), has also resigned over the scandal. The two banks are rumoured to have been involved in a €200bn money laundering scheme. These allegations have centred around the bank’s subsidiaries in Estonia, where money was laundered from countries like Russia and the UK.

Other European banks outside of Scandinavia have also been caught in the scandal, such as the Dutch bank ING and the German bank Deutsche Bank. They were fined €775m and $700m respectively.

Danske Bank previously admitted that the safeguards it had in place to prevent money laundering were insufficient and ought to be reworked. While Swedish authorities are still investigating allegations against Swedbank, the investigations have recently been widened after revelations made on Swedish public television. The reports by Swedish broadcaster SVT suggest that the total money laundered through Swedbank’s Estonian subsidiary was a staggering €135bn.

What's the big picture effect?

Banks are required to have strict safeguards in place against money laundering, requiring them to know whose money they are handling and to report any suspicious transactions. This self-reporting strategy has become vitally important due to the absence of international regulations on the matter. With that being said, the fight against money laundering is an uphill task for two key reasons: 

  1.  Money laundering is difficult to combat because the money is often laundered internationally. However, most laws regulating money laundering are made by national governments and so does not cross borders. With that being said, regulators may find it difficult to investigate money laundering cases as they may struggle to access financial records.
  2.  Money laundering is made even more difficult to combat as it is fast changing. Due to the involvement of such influential figures and the fact that huge amounts of money are usually at stake, the methods used to launder money are constantly changing to try to void the scope of new regulations.

Money laundering has implications far beyond just banking, often reaching the political sphere too. One individual who has been connected to the scandal is Paul Manafort, who was one of the chairmen in Donald Trump’s presidential campaign. Manafort is alleged to have laundered €3.7m for former Ukrainian president Viktor Yanukovych (who was ousted in the 2014 revolution). Additionally, he is being tied to an additional $25m payment made through Swedbank’s Estonian subsidiary. This clearly shows how a lack of clear regulations can potentially have a great influence on politics as well as the internal workings of banks.

Report written by Harry Barnes

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